LA01/LINDR/165352.3 3
EIGHTH AMENDMENT TO LOAN AND SECURITY
AGREEMENT
THIS EIGHTH AMENDMENT TO LOAN AND
SECURITY AGREEMENT (the "Amendment"), dated as
of May 19, 2000, is entered into between
CONGRESS FINANCIAL CORPORATION (WESTERN), a
California corporation ("Lender"), and
GOTTSCHALKS INC., a Delaware corporation
("Borrower"), with its corporate office
located at 7 River Park Place East, Fresno,
California 93720.
RECITAL
A. Borrower and Lender have previously
entered into that certain Loan and Security
Agreement dated December 20, 1996, as amended
by the First Amendment to Loan and Security
Agreement, dated as of August 20, 1998, the
Second Amendment to Loan and Security
Agreement, dated as of September 1, 1998, the
Third Amendment to Loan and Security
Agreement, dated as of December 18, 1998, the
Fourth Amendment to Loan and Security
Agreement, dated as of January 29, 1999, the
Fifth Amendment to Loan and Security
Agreement, dated as of March 1, 1999, the
Sixth Amendment to Loan and Security
Agreement, dated as of August 12, 1999 and the
Seventh Amendment to Loan and Security
Agreement, dated as of March 27, 2000 (as
amended, supplemented or modified from time to
time, the "Loan Agreement"), pursuant to which
Lender has made certain loans and financial
accommodations available to Borrower. Terms
used herein without definition shall have the
meanings ascribed to them in the Loan
Agreement.
B. Borrower is purchasing 37 store
locations, together with the associated
leases, machinery, equipment, installations,
furniture, tools, spare parts, supplies and
maintenance equipment (collectively, the
"Lamonts Purchased Stores"), from Lamonts
Apparel, Inc., a Delaware corporation, in its
capacity as debtor-in-possession in Case No.
00-00045 (TTG) (the "Bankruptcy Case") in the
United States Bankruptcy Court for the Western
District of Washington (the "Bankruptcy
Court"), and is assuming the leases and
certain other contracts with respect to the
Lamonts Purchased Stores, all in accordance
with the Asset Purchase Agreement dated as of
April 24, 2000 between Lamonts Apparel, Inc.
and Borrower previously given to Lender (the
"Purchase Agreement").
C. Lender and Borrower wish to amend the
Loan Agreement under the terms and conditions
set forth in this Amendment. Lender and
Borrower are entering into this Amendment with
the understanding and agreement that, except
as specifically provided herein, none of
Lender's rights or remedies as set forth in
the Loan Agreement is being waived or modified
by the terms of this Amendment.
NOW, THEREFORE, in consideration of the
foregoing and the mutual covenants herein
contained, and for other good and valuable
consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties
hereby agree as follows:
1. Definitions. The following changes are
made to the definitions in Section 1 of the
Loan Agreement:
(a) Section 1.39 of the Loan Agreement is
hereby amended to read in its entirety as
follows:
1.39 "Maximum Credit" shall mean,
with reference to the Revolving Loans and
the Letter of Credit Accommodations, the
amount of One Hundred Eighty Million
Dollars ($180,000,000).
(b) The following definitions are added at
the end of the present definitions:
1.61 "Lamonts Purchased Stores"
shall have the meaning set forth in the
recitals to this Agreement.
1.62 "New Lamonts Inventory" shall
mean any Inventory purchased by Borrower
to stock the Lamonts Purchased Stores.
2. Revolving Loans. Section 2.1(a)(i) of
the Loan Agreement is hereby amended to read
in its entirety as follows:
"(i) either (A) the least of: (I)
seventy-five percent (75%) of the Value
of the Eligible Inventory, (II) eighty-
five percent (85%) of the Appraised Value
of the Eligible Inventory, or (III)
thirty-seven and one-half percent (37.5%)
of the Retail Sales Price of the Eligible
Inventory; or (B) provided no Event of
Default shall have occurred and be
continuing, then at Borrower's option and
upon one (1) day's prior written notice
to Lender, from November 1 through
December 31 of each calendar year, the
least of (I) eighty percent (80%) of the
Value of Eligible Inventory, (II) eighty-
five percent (85%) of the Appraised Value
of the Eligible Inventory, or (III)
thirty-nine percent (39%) of the Retail
Sales Price of the Eligible Inventory,
which percentages shall remain in effect
through December 31 unless revoked by
Borrower upon one (1) day's prior written
notice to Lender; provided, however, that
advances against New Lamonts Inventory
that is also Eligible Inventory shall be
made only at the rate of 75% of the Value
of Eligible New Lamonts Inventory through
December 31, 2000, after which date no
distinction shall be made between New
Lamonts Inventory and other Inventory;
and provided, further, that advances
against Eligible Domestic In-Transit
Inventory shall not, at any one time,
exceed Five Million Dollars ($5,000,000);
minus"
3. Accommodation Fee. Concurrently with the
execution of this Amendment, Borrower shall
pay Lender an accommodation fee of Three
Hundred Thousand Dollars ($300,000,000) for
the processing and approval of this Amendment,
which fee shall be fully earned upon the
effectiveness of this Amendment.
4. Effectiveness of this Amendment. Lender
must have received the following items, in
form and content acceptable to Lender, before
this Amendment is effective and before Lender
is required to extend any credit to Borrower
as provided for by this Amendment. The date on
which all of the following conditions have
been satisfied is the "Closing Date".
(a) Amendment. This Amendment fully executed
in a sufficient number of counterparts for
distribution to Lender and Borrower.
(b) Authorizations. Evidence that the
execution, delivery and performance by
Borrower and any instrument or agreement
required under this Amendment have been duly
authorized.
(c) Representations and Warranties. The
representations and warranties set forth
herein and in the Loan Agreement must be true
and correct.
(d) Payment of Accommodation Fee. Lender
shall have received the fee required by
Section 3 of this Amendment.
(e) Bankruptcy Court Order. Lender shall
have received a copy of an effective Order of
the Bankruptcy Court providing for the
transfer to Borrower of good and marketable
title to the Lamonts Purchased Stores and all
assets related thereto free and clear of any
liens and encumbrances, except Lender's liens
under the Loan Agreement (the "Order"), which
Order shall be reasonably acceptable to
Lender.
5. Expiration of Appeal. Lender will not
make, and Borrower will not request, any
advances in excess of One Hundred Forty
Million ($140,000,000) or any advances based
on New Lamonts Inventory until the time for
any appeal of the Order shall expire without
any party having filed an appeal. If an
appeal is filed, the Loan Agreement shall,
without any further action on the part of
Lender or Borrower, be deemed to be amended to
delete all the changes made by this Amendment,
and the Accommodation Fee shall be refunded in
full to Borrower.
6. Covenants of Borrower.
(a) Borrower shall execute and deliver such
UCC-1 financing statements and other documents
as Lender may reasonably require to perfect
its security interest in, or maintain its
priority with respect to, any Collateral,
including the Lamonts Purchased Stores and
related assets.
(b) Borrower shall exercise reasonable
efforts to obtain landlord waivers and
consents or access agreements satisfactory to
Lender with respect to the Lamonts Purchased
Stores or any new Collateral location.
7. Representations and Warranties. The
Borrower represents and warrants as follows:
(a) Authority. The Borrower and each other
Loan Party has the requisite corporate power
and authority to execute and deliver this
Amendment, as applicable, and to perform its
obligations hereunder and under the Loan
Documents (as amended or modified hereby) to
which it is a party. The execution, delivery
and performance by the Borrower of this
Amendment and by each other Loan Party of each
Loan Document (as amended or modified hereby)
to which it is a party have been duly approved
by all necessary corporate action of such Loan
Party and no other corporate proceedings on
the part of such Loan Party are necessary to
consummate such transactions.
(b) Enforceability. This Amendment has been
duly executed and delivered by the Borrower.
This Amendment and each Loan Document (as
amended or modified hereby) is the legal,
valid and binding obligation of each Loan
Party hereto or thereto, enforceable against
such Loan Party in accordance with its terms,
and is in full force and effect.
(c) Representations and Warranties. The
representations and warranties contained in
each Loan Document (other than any such
representations or warranties that, by their
terms, are specifically made as of a date
other than the date hereof) are correct on and
as of the date hereof as though made on and as
of the date hereof.
(d) No Default. No event has occurred and is
continuing that constitutes, or would with
notice or passage of time constitute, an Event
of Default.
8. Choice of Law. The validity of this
Amendment, its construction, interpretation
and enforcement, the rights of the parties
hereunder, shall be determined under, governed
by, and construed in accordance with the
internal laws of the State of California
governing contracts only to be performed in
that State.
9. Counterparts. This Amendment may be
executed in any number of counterparts and by
different parties and separate counterparts,
each of which when so executed and delivered,
shall be deemed an original, and all of which,
when taken together, shall constitute one and
the same instrument. Delivery of an executed
counterpart of a signature page to this
Amendment by telefacsimile shall be effective
as delivery of a manually executed counterpart
of this Amendment.
10. Due Execution. The execution, delivery
and performance of this Amendment are within
the power of Borrower, have been duly
authorized by all necessary corporate action,
have received all necessary governmental
approval, if any, and do not contravene any
law or any contractual restrictions binding on
Borrower.
11. Reference to and Effect on the Loan
Documents.
(a) Upon and after the effectiveness of this
Amendment, each reference in the Loan
Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to
the Loan Agreement, and each reference in the
other Loan Documents to "the Loan Agreement",
"thereof" or words of like import referring to
the Loan Agreement, shall mean and be a
reference to the Loan Agreement as modified
and amended hereby.
(b) Except as specifically amended above, the
Loan Agreement and all other Loan Documents,
are and shall continue to be in full force and
effect and are hereby in all respects ratified
and confirmed and shall constitute the legal,
valid, binding and enforceable obligations of
Borrower to Lender.
(c) The execution, delivery and effectiveness
of this Amendment shall not, except as
expressly provided herein, operate as a waiver
of any right, power or remedy of Lender under
any of the Loan Documents, nor constitute a
waiver of any provision of any of the Loan
Documents.
(d) To the extent that any terms and
conditions in any of the Loan Documents shall
contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving
effect to this Amendment, such terms and
conditions are hereby deemed modified or
amended accordingly to reflect the terms and
conditions of the Loan Agreement as modified
or amended hereby.
12. Ratification. Borrower hereby restates,
ratifies and reaffirms each and every term and
condition set forth in the Loan Agreement, as
amended hereby, and the Loan Documents
effective as of the date hereof.
13. Estoppel. To induce Lender to enter into
this Amendment and to continue to make
advances to Borrower under the Loan Agreement,
Borrower hereby acknowledges and agrees that,
after giving effect to this Amendment, as of
the date hereof, there exists no Event of
Default and no right of offset, defense,
counterclaim or objection in favor of Borrower
as against Lender with respect to the
Obligations.
IN WITNESS WHEREOF, the parties have
entered into this Amendment as of the date
first above written.
"BORROWER"
GOTTSCHALKS INC.,
a Delaware corporation
By: /s/ Michael Geele
Title: Senior Vice President/CFO
"LENDER"
CONGRESS FINANCIAL CORPORATION (WESTERN), a
California corporation
By: /s/ Kristine Metchikian
Title: Vice President
